Essays on mutual fund performance and organization

This dissertation examines how the management team structure, management team characteristics and individual manager characteristics of mutual fund portfolio management teams relate to performance, risk taking and other characteristics of mutual fund portfolios. We utilize a unique data set on over 1,200 mutual fund managers and management teams of more than 2,000 distinct open-end mutual fund portfolios over the 1997 to 2004 period.; In the first essay we first analyze differences in performance and risk taking between sole-managed and team-managed mutual funds. We find that teams underperform single managers in terms of risk-adjusted returns in the bear market period 2001 2004. This underperformance is more evident among growth-oriented funs. Further, we focus on team-managed funds and examine how team-level characteristics such as team size, age and diversity relate to performance. We find that teams having diverse levels of managerial experience exhibit superior performance. However, when one of more of the fund's manager(s) works for multiple funds, performance deteriorates. Overall, our results suggest that, in contrast to what conventional wisdom suggests, more heads are not better than one when it comes to managing a mutual fund.; In the second essay we focus on the manager characteristics of sole-managed funds. The findings suggest that, consistent with Chevalier and Ellison (1999), managers who attend high SAT-score institutions outperform other managers; however, the significance of the SAT score decreases after controlling for the quality of the manager's MBA degree. Managers who attend highly ranked business schools perform much better than other managers. We fail to find evidence that managing many mutual fund portfolios affects mutual fund performance negatively.; Finally, the third essay examines the determinants and consequences of team management by focusing on 503 mutual funds that have switched their management team structure during the period 1997-2004. We find that team-managed funds switch to sole-managed after poor performance while sole-managed funds switch to team-managed after significant over-performance. When a fund becomes sole-managed performance improves significantly (184 basis points in terms of 4-factor alphas) while a switch to team management leads to deteriorating performance. Sole-managed funds that add more managers exhibit a decline in performance of 190 basis points. Sole-managed funds that switch to team-managed experience above normal increases in size (total net assets) the year before the change. Weak evidence suggests that risk taking considerations also relate to the decision to change a fund's management team structure. In general, our findings confirm evidence from the first essay that team-managed funds do not offer superior risk-adjusted performance.